The Cotton Catastrophe
Jennifer Marks, Editor-in-Chief -- Home Textiles Today, 12/14/2009 12:00:00 AM
As if 2009 didn't provide enough challenges to the industry over the course of some 49 weeks so far, it is going out with a bang as soaring cotton prices and capacity shortages have home textiles sourcers scrambling.
One supplier told me that in some cases he is being quoted pricing contracts that are good for one week only. At the same time, he's had retailers asking for five-month price guarantees.
With yarn prices up as much as 8%, finished product prices are jumping as much as 20%, suppliers are saying. Obviously, no retailer is going to raise its tag prices by 20%, nor are retailers in much of a mood to take it out of their margin — especially now that the business is showing slender signs of growth.
What happened? China's consumption increased, but U.S. cotton production also fell off. This wasn't solely a matter of cotton farmers deciding to plant something else during a down economy. Heavy rains during the harvest season destroyed some U.S. cotton crops in the Mid-South, Southwest and nearby states — in some cases up to 60%, according to the National Cotton Council of America.
Cotton farmers are urging Congress to pass emergency financial assistance ahead of the spring planting season. The legislation would provide $650 million in funding to farmers of cotton and other crops that were damaged by the severe weather.
As cotton-consuming industries have turned to other cotton-producing nations for supply, offshore prices have spiked as well. The Financial Express of India reported last week that cotton farmers are bypassing state-owned procurement agencies to get higher prices from private selling firms. The Daily Times of Pakistan in recent weeks noted that the country's domestic cotton prices were up 21% since the beginning of the year.
This is not a problem that looks to resolve itself rapidly. In October, the U.S. Department of Agriculture forecast that the gap between global cotton consumption and production is widening. In the 2009/2010 season, stepped up cotton production in the United States and Australia will not fully offset anticipated reductions in China (the world's largest cotton producer), Uzbekistan and the African Franc Zone, according to the USDA.
One assumes we're going to see a lot more blended product as a result. That's probably not such a tough sell in the mass market, but it may be more difficult to pass off in better/best goods.
Right now, "the fabric of our lives" is making life in the textiles industry pretty uncomfortable.
We would love your feedback!
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